Chapter 1: What are the latest trends in the Consumer Price Index report?
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Take a listen wherever you get your podcasts. nice inflation report you've got there too bad a lot of it's useless now i'm kidding mostly from american public media this is marketplace From Minnesota Public Radio in St. Paul, I'm Kimberly Adams in for Kai Risdahl. It's Wednesday, March 11th. Good to have you along. I'm at APM headquarters today instead of my normal spot in D.C.
But back in the nation's capital, this morning we got the latest read on inflation from the Federal Bureau of Labor Statistics. The Consumer Price Index registered just a 0.3% increase in the month of February. Over the past 12 months, prices rose 2.4%. That's the lowest reading in five years. But there are, as is so often the case, some caveats to what seems like encouraging news.
Here to give us her expert opinion on the report is Nicole Servi, an economist for Wells Fargo Corporate and Investment Banking. Welcome back to the show. Thanks for having me. Can I just get your quick reaction to the top line numbers? Yeah. So in terms of the month over months, those looked pretty good.
But if you look at, for instance, the year over year rates of CPI and core CPI, they both moved sideways. And what the report suggests to me is that, yes, inflation is not as bad as we had feared by this point in time, but we're also not seeing progress either. And now we got to think about this energy price shock.
And so while this report is encouraging, I do think it feels a little dated at this point in time, especially once we turn to the March CPI and get some of that immediate reaction to what we're seeing in the conflict in the Middle East. Right. This is the giant asterisk on this report, which is that all of this data was before we went to war with Iran. Right. Correct.
And so how are economists, do you think, factoring that in when reading this report? So if you look at the energy line, for instance, you can see that gasoline prices actually rose pretty solid in February, a little bit stronger than I think you would expect in a, let's say, a quote unquote typical February.
And if you also think about the really bad winter storms on the Northeast, you wouldn't expect gasoline prices to rise as much as they did. But if you look at what was going on in oil, oil prices were actually rising in February in anticipation of potential escalation in the Middle East. And you were seeing that risk premium being priced in.
And that got directly translated to consumers already in February with a pretty decent gain in gasoline prices. And that gain is only just going to get stronger in March. What does this mean for the Fed? The CPI reading like this might be encouraging to folks on Wall Street that wanted another interest rate cut. But as you said, this oil price shock has now come down the pipeline.
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Chapter 2: How are energy prices impacting the economy?
Thank you.
Now, there is some useful info in February's CPI report, even if a lot of it is a bit outdated due to the war. For example, even though prices overall rose 2.4 percent year over year, as analysts expected, natural gas prices rose at a much faster pace. They're up 10.9% compared to the same time last year. And that's before the Iran war threatened to choke off a fifth of the global gas supply.
Marketplace's Nova Saffo takes a look. Lots of American households saw higher heating bills this winter, especially in the Northeast and Midwest. A big factor is that it was colder than last winter.
So about half the increase that we're estimating is from the fact that families just need to use more natural gas.
That's Mark Wolf. He heads the National Energy Assistance Directors Association. The cold weather and the higher demand came on top of another trend that's also elevated prices for natural gas.
The rapid growth of data centers means that we need more electricity and about 40 percent The feeder fuel to produce electricity is from natural gas.
The consumer advocacy group Power Lines says three in five Americans are feeling financially stressed because of rising utility bills. Over the last few months, the cost pressures added up. Wolf says aid groups he works with have been reporting a lot more need.
People that didn't really pay attention to the utility bills in the past are now paying attention. We're hearing from You know, moderate income and even some middle class families are asking if there's any help to pay their bills. We never saw that before. It was usually just the very poor.
Could the Iran conflict make the situation worse? Well, in Asia and Europe, natural gas prices have been soaring because liquefied natural gas exports from the Middle East have been interrupted. But for the U.S., there's some good news, says Ken Medlock, energy economist at Rice University.
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Chapter 3: What is the significance of the recent inflation numbers?
actually produces plenty of natural gas. It even exports a growing portion of what it makes. And Tom Tseng, assistant professor of energy finance at Texas Christian University, says natural gas prices in the U.S. should actually come down soon.
We're almost mid-March, heading into April. April's very much a low-demand period for natural gas domestically. That's kind of helping the situation.
Meaning Americans are likely to see some relief from the higher bills they've been paying. And natural gas prices here in the U.S. should remain relatively affordable compared to what's happening in the rest of the world. I'm Novosafo for Marketplace. Look, this story is changing quickly, but we've got you covered.
Be sure to listen to David Brancaccio and our Marketplace Morning Report team to get the latest on how this war is affecting the global economy and your personal economy, too. Give it a listen every weekday morning. Energy prices aside, inflation over the past year has been a lot more muted than economists expected.
That's despite the fact that the president's tariffs are still making imported goods more expensive. Now, a handful of factors are holding inflation back. Trade agreements, exemptions for various industries, and a lot of companies are just absorbing the costs of tariffs rather than passing it along to customers.
There's also an argument to be made that import taxes might not be inflationary at all and that tariffs could actually reduce inflation. I know that all sounds contradictory, but Marketplace's Justin Ho will make it make sense. Tariffs, by definition, are taxes on imported goods. They make those products more expensive.
Thing is, tariff policy over the last year has been erratic, and the uncertainty that's generated has its own side effects.
We compare it to a broken traffic light at a four-way stop.
Megan Schoenberger is senior economist with KPMG.
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